June 2, 2015

Southern Co.'s Georgia Power is poised to take advantage of
a new state law that would allow the utility and other solar providers to get
into the rooftop solar market more easily.

The move comes shortly after the state Legislature passed a
law that lets Georgians enter into long-term financing arrangements with
independent solar power providers, propping open the door for a competitive
solar market. For Georgia Power, it marks an opportunity for the dominant
utility to get into the rooftop solar business.

According to multiple sources, there has been growing
anticipation around Georgia Power's plans for entering the rooftop solar market
once the law takes effect July 1.

"As a company with one of the most innovative and
fastest growing solar programs in the country, we are engaged in the market and
speak with solar installers and manufacturers regularly," Georgia Power
spokesman Jacob Hawkins said in an email.

Hawkins referred to the July start date for the new law --
the Solar Power Free Market Financing Act -- as "a landmark date for solar
in Georgia."

"We expect that the law will further stimulate the
competitive market here," Hawkins said.

Today, Georgia Power does not offer financing for customer
installations, and it also doesn't install or sell solar panels. But Hawkins
said the company "may introduce new resources or programs as we move into
summer and the changing marketplace."

The move puts words into action for Southern Co. CEO Tom
Fanning, who has been talking publicly about how the company wants to find
strategies for customers and tap the rising demand for distributed forms of
generation, like solar.

Fanning told EnergyWire last May, "If
somebody wants to buy distributed generation, I want to sell it to 'em."

He expanded on that during and after the Atlanta-based
energy giant's 2014 shareholders meeting. "If its day will come, Southern
Co. needs to learn how to compete in that business. And if financing is
important, we'll consider that, as well," he said (EnergyWire, May
29, 2014).

In an interview this March, Fanning called for a rate
structure that includes a price for when baseload power is used as a backup
when the sun isn't shining and the photovoltaic panels aren't producing power.

"If you adequately reflect the value that those assets
bring, then we're perfectly happy with moving ahead with distributed
generation," he said (EnergyWire,
March 17).

The decision for Georgia Power is significant. The utility
is one of four regulated electric companies that Southern owns. All are used to
getting electricity from centralized sources and have been resistant to
renewables, especially distributed ones.

Southern's Gulf Power and Mississippi Power electric
companies are adding solar to their output through utility-scale projects.
Georgia Power stands out because it is set to have more than 1 gigawatt of
solar on its system by the end of 2016.

The effort is largely through a robust program that started
-- and expanded -- with a nudge from the Georgia Public Service Commission. The
electricity that flows from the panels established under that program flows
onto Georgia Power's grid, however, and customers do not use it to offset their
own use.

Georgia's new solar law makes the state the first in the
region to have such a wide range of financing options for solar panels,
according to those involved in the months of negotiations.

It also allows for the state's regulated, municipal and
electric cooperative utilities to enter the market, as well; they just cannot
compete in each other's territories.

Fanning has made it clear that he believes utility-scale
solar is more economical. Other utilities as well as solar providers agree with
him on that. But he's made it clear to EnergyWire and other media
outlets that he wants to make sure his company is in the residential solar game
before a well-established outside provider comes in.

"I don't think I'd invite Solar City in. I'd rather do
it myself," Fanning said in an interview with USA Today. "If I
array my corporate resources, my strategy, an optimal way, I think I can serve
my customer better than anybody else."

In the view of one veteran solar industry executive, the
move makes sense "because [utilities] are getting their lunch eaten by
Solar City and the other companies right now, so why wouldn't they,
right?"

The entry of utilities such as Georgia Power would be a boon
to equipment manufacturers, he said. "But there are some companies who
have made it their business to compete with the utilities for their customers
that will [be] concerned about this kind of development," the executive
said.

An official with a national solar trade group said the
organization had yet to take a position on utilities entering the residential
solar market.

"But any such program should be accompanied by rules
that tend to level the market and allow independent solar providers to compete
fairly," said Sean Gallagher, vice president of state affairs for the
Solar Energy Industries Association.

No net metering

It's unlikely, at least for now, that some of the major
national solar providers will do business in Georgia because the state doesn't
let consumers sell solar back for a full 1-to-1 retail credit, known as net
metering. Those with solar panels sell back the power at avoided costs only,
which is significantly lower.

"Net metering is necessary for establishing a stable
market," said Susan Glick, senior manager of public policy at Sunrun Inc.
and spokeswoman for the Alliance for Solar Choice.

Will Craven, public policy director at SolarCity Corp., said
the bill is a good place to start for Georgia's consumers, but other regulatory
barriers remain.

Fanning has said avoided cost is the right concept unless a
rate structure is established to reflect the value of the electric system.
Avoided cost is the amount it would take to run the next-cheapest power plant.

Analysts said the residential and small commercial solar
market likely won't be a huge new line of revenue for the company.

"No matter how big this first round of investment is,
it's not going to be very material to the bottom line," said Mark Barnett,
a utility analyst with Morningstar Inc. "It doesn't mean that it's not
something that they aren't managing closely. If there are profits to be made,
they are going to go for it."

In short, the utility isn't going to do -- or not do --
anything that would threaten its business, he said.

Southern and its operating companies in Florida, Georgia and
Mississippi have made more headway with utility-scale solar projects.
Southern's wholesale power unit, Southern Power, just bought a 103-megawatt
solar array in Georgia, which brings the subsidiary's total number of solar,
wind and biomass projects to 1,100 MW.

"They have shown an appetite for only utility-scale
renewables," Barnett said. "Rooftop stuff is small potatoes."